Minimizing Investment Risk

A

The answer to the question is A. Capital preservation.

Capital preservation is a primary investment objective for many investors who wish to minimize their risk of loss, usually in real terms. Investors seek to maintain the purchasing power of their investment, which means that the return on their investment needs to be no less than the rate of inflation.

Inflation is a general increase in the prices of goods and services over time, which reduces the value of money. If the return on an investment does not keep up with the rate of inflation, then the investor's purchasing power will decrease, and they may not be able to buy the same amount of goods and services in the future that they can buy today.

Capital preservation strategies focus on investments that have low risk and provide a steady income stream, such as fixed-income securities like bonds or Treasury bills. These investments generally have a lower return than riskier investments like stocks, but they also have lower volatility and a lower chance of losing money.

In summary, capital preservation means that investors seek to maintain the purchasing power of their investment, and the return on their investment needs to be no less than the rate of inflation. This objective is achieved through investments with low risk and a steady income stream, such as fixed-income securities like bonds or Treasury bills.